« Roubini: Gordon Gekko Reborn | Main | links for 2010-08-14 »

Saturday, August 14, 2010

Sachs: Market Reforms, 20 Years Later

This a comparison of developments in Russia and Poland over the last twenty years by Jeff Sachs. I don't know as much as I should about the biases Sachs might bring to the table due to his role as an advisor to Poland, who took his advice after the break-up of the Soviet Union, and his resignation as an advisor to Russia when he felt his prescriptions were being ignored (he is known for the "shock doctrine"):

Market Reforms, 20 Years Later, by Jeffrey D. Sachs, Commentary, Scientific American: I recently had the pleasure to revisit Warsaw, Poland, and St. Petersburg, Russia, two decades after the start of market reforms in which I had participated as an economic adviser. ...
Warsaw has enjoyed a building boom ... despite the economic slowdown in western Europe. St. Petersburg glories in the architectural treasures of the past but with much less evidence of current dynamism. ...
I have often been asked since then why market reforms took stronger hold in some places than others. The answers, rooted in the complex interplay of geography, politics, history and culture, are well worth understanding.
The greatest dividing line in outcomes has been the Soviet border. Countries such as Poland, Hungary, the Czech Republic and Slovakia—which had been outside of the Soviet Union but under Soviet domination—were eager to dash toward membership in the European Union. That membership process usefully steered their internal politics and legal reforms and prompted incoming foreign investments from Germany, Italy, Austria and Scandinavia.
Conversely, Russia was not dashing to Europe but was instead grappling with its own past and future. The collapse of the Soviet system was not followed by a consensus on a new economic and political model within Russia... Russian statecraft continued to be guided by the centuries-old practice of bureaucratic rule that cast a wary eye on market forces.
Culture has also shaped the dynamics of reform. ...Poles maintained a healthy skepticism toward state power... Out of 180 countries evaluated by the ... index of perceived public-sector corruption, Poland stands as the 49th least corrupt. ...
In Russia, on the other hand, corruption has run rampant during the past 20 years... The institutions of civil society, suppressed by centuries of tsarism and obliterated by Soviet-era state brutality, remain weak... Russia, not surprisingly, lands at a dismal 146th on the ... corruption list.
One of the sad parts of the story was the failure of U.S. presidents George H. W. Bush and Bill Clinton to support Russia’s embattled reformers at crucial moments. ...American officials were insensitive to the growing Russian corruption and remained passive when they could have helped reformers to keep it in check. After all, the U.S. has its own corruption problems, ranking a rather dreary 19th on the ... list, below most other high-income countries.
I left St. Petersburg feeling that so much more economic reform was still possible ... throughout Russia. The people’s high education and technical expertise do not adequately translate into new businesses and higher incomes. The bureaucracy keeps its traditional grip, even maintaining the internal registration system from the time of the tsars that constrains Russians from moving from city to city. Small businesses are similarly encumbered with arbitrary regulations. Russia’s gains in political and economic liberalization are undoubted, but this country with so much talent has yet to combine the best of its cultural heritage, its technical skills and the advantages of greater economic freedom

    Posted by on Saturday, August 14, 2010 at 07:09 PM in Development, Economics | Permalink  Comments (8)



    Feed You can follow this conversation by subscribing to the comment feed for this post.